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Size, Efficiency, and Profitability: Empirical Evidence from Mexican Assembly Plants

Joan B. Anderson

Abstract


This study is an empirical investigation of the relationship between the size of a plant and its efficiency and profitability. The question of optimum size of plant has important implications for both governmental development planning policy and managerial planning. In many developing countries policies toward business with respect to credit, subsidies and tax treatment often are differentiated by size of firm based on the conventional wisdom that larger firms are more efficient and more profitable. If the advantage of large firms is due to economies of scale, then the relationship between the size of plant and efficiency should be positive. There is, however, mounting empirical evidence that for many industries the importance of economies of scale has been overestimated.

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©2009
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Print ISSN: 0886-5655
Online ISSN: 2159-1229

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